National Property Report – December 2015


Sydney runs out of steam

Boom time is officially over as Sydney enters a new phase of the cycle. But don’t expect prices to fall any time soon

The buyer exuberance seen during the past year appears to be finally abating, if the latest stats from CoreLogic RP Data are anything to go by.

According to the September results, median dwelling prices rose just 0.1% during September to $785,000. During the past 12 months, prices surged by 16.7%. While these numbers are still strong by any measure, they are slightly weaker compared to the July results when prices grew by 17.6%.

“The slower month-on-month reading across the Sydney market comes at a time when auction clearance rates have slipped to the low 70% range from week to week, and the number of advertised properties has risen,” explains Tim Lawless from CoreLogic RP Data. “Vendors are still enjoying strong selling conditions, but it looks like buyers are slowly regaining some leverage in what has been a very hot market.”

Growth set to continue, albeit at a slower pace

Despite the telltale signs of a flattening market, Linda Phillips, head of research at Propell National Valuers, remains upbeat about Sydney’s prospects.

“We expect Sydney home prices to continue to march on to record heights,” she says. “Although prices have risen considerably in the last three years, this is a boom, not a bubble, since it is a reflection of demand. Demand exceeds supply. Sydney does not have the capacity to house all the people that would like to live there. While a construction boom for apartments is now under way, it still leaves demand way in excess of supply.”

Sydney-based buyer’s agent and CEO of Rich Harvey agrees that Sydney is seeing a gradual slowdown but he doesn’t expect anything catastrophic.

“The market is certainly losing a bit of momentum, which is good,” he says. “Property prices are not tanking or crashing like what some media are saying. What we’re seeing is the slowdown of activity. There’s no more frenetic activity, no more FOMO [fear of missing out]. We’re seeing more measured selling and buying.”

This means that while vendors can still expect to get reasonably strong selling prices, they have to be more realistic, according to Harvey.

“You haven’t missed the boat if you haven’t sold. There’s still going to be some growth, just not as strong as it has been compared to the past two years. Don’t expect to get a massive over-reserve price when you sell.”


Melbourne turns but remains a seller’s market

Just like Sydney, the heat has come off the Melbourne market, but experts say there’s still enough heat and momentum for growth to occur

Melbourne has raced past Sydney (again), with median dwelling prices surging 2.4% in September, compared to a flat 0.1% growth for Sydney, according to the September CoreLogic RP Data results.

The gap widened during the September quarter when Melbourne median values surged 7.4% against Sydney’s 4.6%.

But the real story is not about how Melbourne has outperformed Sydney; it’s about how both markets are now losing steam compared to their autumn performance.

Andrew Wilson, senior economist at Domain, explains that the signs are clear that the market is slowing down.

“The auction clearance rate is easing back below 70% compared to around 80% to 90% in May. The growth in the Melbourne market is not as extreme any more,” he says. “There’s no doubt that Melbourne peaked in autumn. While price growth is slow, it’s still a seller’s market.”

Wilson notes that the lower interest rate environment and the strong performance of the middle- to upper-end suburbs are driving the price growth in Melbourne. However, he expects prices to moderate amid very high auction listings this spring selling season.

Rents remain flat

Despite the solid price growth, median rents for houses flatlined during the past year, with just a 2.6% increase to $390, according to the latest rental report from Domain. Melbourne unit rents also remained steady over the quarter, sitting at the peak level of $370 – 1.4% higher than in the September quarter of 2014.

“With rental prices significantly below those of Sydney, Melbourne is definitely a more tenant-friendly city,” says Wilson. “More recently, there has been a bit of relief for tenants, although they’ve still had to find more money than they did at the same time last year.

“The flat median rental price result is surprising and goes against the increased supply of property in Melbourne. That said, it’s still a more affordable option than most of the other Australian capital cities,” he says.

While house price growth is expected to slow next year, Propell National Valuers is still forecasting at least 5% growth for Melbourne houses. It’s a different story for apartments, however; the company is expecting apartment prices to slow to 2% growth next year. This reflects the building wave that is going on with apartments in inner-city suburbs, which is limiting price growth.

“The prospects for Melbourne remain good next year,” says Linda Phillips, head of research at Propell.


Signs of nascent recovery appear, albeit patchy

Brisbane was one of only three capital cities to record growth in value during recent months. However, the momentum for full-on recovery remains elusive

Brisbane’s housing market staged the third-strongest performance for growth in dwelling values across the capital cities over the past 12 months.

According to the September stats from CoreLogic RP Data, dwelling values rose 4.6%, driven almost exclusively by the detached-housing sector.

Median house values climbed by 4.9% during the same period to $494,000. However, units fell behind, with just 2.1% growth in value.

“During the past month we have continued to see improving buyer interest and, concurrently, an increase in house sale prices in the Brisbane market,” says Linda Phillips, head of research at Propell.

“This is particularly apparent in the inner suburban areas with good access to the CBD. Well-presented homes in areas such as Clayfield [Brisbane North], Balmoral [Brisbane East], Indooroopilly [Brisbane West] and Tarragindi [Brisbane South] are seeing improved auction clearance rates and strengthening prices – buyer interest in each of these areas is strong in the $800,000–$1,000,000-plus house market segment.”

Although unit prices have shown only modest price growth, there have been an increasing number of sales, noticeably to interstate and offshore investors, Phillips notes. “Clearly, such buyers are interested in ‘new’ assets and, as such, are paying various premiums to obtain them – prices for three- to four-year-old units have remained fairly static in the past year,” she says.

Growth to remain subdued

While these numbers are encouraging, some experts have expected better performance overall.

“Brisbane has been the biggest disappointment this year,” says Andrew Wilson, senior economist at Domain. “There have been a lot of expectations of strong growth this year, perhaps tracking or slightly below the Sydney and Melbourne markets. So far it hasn’t delivered. It’s gone sideways instead.”

He explains that the modest growth has been due to the fragile confidence in the market. “Even the mid- to higher-priced suburbs that have been holding the market up seem to have fallen in spring,” he says. “The market lacks drive and energy. As such, I think it will only see a modest growth in the medium term.”


Perth prices drop further

Tough times for landlords as property prices and rents continue to slide

Dwelling prices in Perth weakened further in the September quarter, losing 0.7%. During the year, values fell by 0.9%, according to the CoreLogic RP Data stats.

The decline has been much greater across the unit market, where values have fallen by 4% over the year compared with house values, which were 0.7% lower.

Perth’s rental market is also weakening, with median rents for houses falling by 5.6% and unit rents falling by 6.8%, according to Cameron Kusher, senior research analyst at CoreLogic RP Data.

“The large fall in weekly rents is also pushing local yields down, with the typical Perth house now showing a 3.9% gross yield while units are returning a gross yield of 4.4%,” he says.

Andrew Wilson, senior economist at Domain, agrees that the Perth market is weakening and he thinks this will continue over the medium term.

“Perth is a market that continues to go backwards,” he says. “Prices will be lower this year than last year. It’s a product of a sharp decline in the local economy. The unemployment rate went from mid-4% to mid-6%. Interstate migration is falling as well. The confidence is very low at the moment.”

Tread carefully

With prices as low as they are now, the question of whether the market has reached the bottom persists, with some analysts forecasting further drops in property values.

“It is definitely a buyer’s market, with the number of listings going up and activity falling,” says Linda Phillips, head of research at Propell. “The continuing recession in the state has seen the population drop significantly. With fewer people moving into Perth, demand has fallen. It’s likely that house prices will fall by another $25,000 over the next year. If this is bad news for vendors, it is good news for buyers as they can take advantage of their strong bargaining position, aiming to pay next year’s prices today.”

Rich Harvey, CEO of, is advising his clients to stay away completely from the Perth market. “I’d stay away from Perth and Darwin,” he says. “They’re undergoing corrections and I expect further falls to happen because their resources sector is depressed.”

Market sweet spot

Phillips warns interstate buyers to be very selective of where they buy in Perth.

“Perth is a large geographical market, extending 40km in each direction. On the edges of the metropolitan area, there is plenty of land available for development and an oversupply of the typical four-bedroom, two-bathroom, first home buyer properties. But there is a preference to live close to the Perth CBD and it is important for investors to identify valued suburbs as close to the CBD as possible,” she says. “You can still get good deals within the 11–12km radius.”

Phillips has analysed this market sweet spot and found that while these areas are still fairly close to the city, they’re offering a below-average median price. Suburbs on the eastern side of the city, such as Eden Hill and Beechboro, offer the lowest median prices at $518,000 and $460,000 respectively.

“The lower price points generally reflect the older properties in these suburbs. But there is a high level of sales activity here. Prices have hardly moved in the past year. Eden Hill is in reasonably close proximity to the Midlands train line, while Beechboro is well served by highways. In the longer term, mooted extensions to the train system are likely to benefit these suburbs, as any train link will have to pass near these on its way to Ellenbrook,” says Phillips.

To the south, Phillips recommends looking at Ferndale, Lynwood and Parkwood.

“These are all well served by the road system, with High Street, Leach Highway and Albany Highway providing easy access to the city and the airport,” she says. “They are one or two suburbs away from the river, and the regional shopping centre of Carousel is an easy distance away. While they were seen as downmarket in past years, they are starting to experience development and gentrification, which should enhance the long-term outlook. Sales activity has been heavy. While Ferndale prices have not increased, those in Beechboro were up 5% in the past year, and Lynwood 4.7%, which means that they are experiencing growth and demand, despite slower metropolitan activity in general.”

The suburb of Willagee is to the south, and closer to Fremantle.

“It has the higher median price at $619,000, but demand is also high, with prices up 5.8% in the past year. The story here is one of redevelopment to higher densities, which is adding value.

“The prospect for these suburbs looks better than average, but once a suburb has been selected, it is important for an investor to be familiar with the product on the market and be savage in their negotiations on price,” says Phillips.


Adelaide falls behind

Adelaide’s performance has been up and down lately. The city has been known for its stability, but the recent volatility is causing investors to stay away

The Adelaide market fell out of favour in September, when median dwelling values dropped by 1.2%, according to CoreLogic RP Data.

Units suffered bigger losses as median values slid by 5.8% in September. During the year, unit values plunged by 6.9%. Only Darwin recorded bigger losses.

While the numbers aren’t encouraging, Andrew Wilson, senior economist at Domain, remains upbeat about Adelaide’s long-term prospects.

“I think Adelaide is a bright spot in the market,” he says. “Adelaide kept its head above water and has been a solid and resilient performer over the last year. Adelaide does have the worst-performing economy, but it’s still recording some price growth. They seem to shrug off issues of a weak economy. Maybe they just got used to it.”

Wilson expects prices to grow by about the same amount as last year, which was 5%. “This will be a good result given issues with the local economy,” he says. “It’s a relatively resilient and remarkable market given the economic headwind.”

Uneven growth

While Adelaide house prices have mostly held up well in recent years, the median disguises a number of different trends. Many outer suburbs, and particularly those in the north, have shown lower or negative growth, according to Linda Phillips, head of research at Propell.

“The impending closure of the car industry has had an impact in the north, which is already suffering from an oversupply of properties on the market,” she says.

“For an investor willing to take a long-term view, these suburbs may offer astute buying but with higher risk. The change in leadership within the federal government is being seen as a positive move for the state, which may lead to employment generation in other areas, submarines and shipbuilding in particular.”

Investment sweet spot

Some suburbs close to the city have shown solid demand and are still below the median price, according to Phillips.

“These include suburbs to the west and south of the city, a location which is also convenient for the airport and for access to the ocean. These are West Croydon, Flinders Park, Brooklyn Park and Glandore. Of these, West Croydon offers the lowest median price of $465,000 and has seen above-average price growth of 5.7% in the past year.

In Brooklyn Park, the median price is slightly higher at $479,000, but it has seen one of the highest price growth rates in Adelaide at 10.8% for the past year.

“Flinders Park has a median price of $503,750. A year ago, prices would not have been much different to adjacent suburbs, but it has experienced high price growth of 11.9% in the past year as buyers turned their attention to it.”

Glandore is the most expensive suburb of these four, at $525,000. But it has seen prices fall in the past year, down 7.9% with lower sales activity, and at this price it could offer value to an investor.

Prospect is the largest suburb in the selection and has the highest median price of $560,000.

Although price growth in the last year was slightly below average, at 1.4%, high sales turnover of 228 properties means there is depth to the market. Well-chosen properties in the southern half of the suburb could offer value.

Firle, located east of the city, is also a suburb to watch. It’s located in an attractive part of the city and offers easy access to the CBD.

“The median price of $533,500 makes it well priced by comparison with its neighbours, and although sales turnover has been low, prices increased 7.8% in the past year and it has the potential to rise further,” says Phillips.


Drop in values keeps buyers away

Weak economy and a lack of apparent growth drivers drag the market lower

It would seem that even attractive yields and cheaper prices are not enough to lure investors to the Apple Isle. The latest stats from CoreLogic RP Data show that median dwelling values fell by 1.9% in September alone. During the past three months, values dropped by 2%. Median house values slid by 2.3% in September and lost 2.3% during the quarter.

While the unit market performed better, surging by 6.7% during the month, buyer activity remained weak. Notwithstanding that, Hobart is a small market where results can be very volatile; the trend has been on the downside, according to Andrew Wilson, senior economist at Domain.

“Hobart started the year on a strong note. But then it fizzled,” says Wilson. “There’s not a lot of positive energy in the Hobart market. It certainly is the most affordable market in Australia. It has the lowest vacancy rate, some of the highest yields, but its economy is weak.”

Wilson points out that the economy needs a boost to kick-start its property market.

“What looked like a good start to the year is now looking like it needs something to lift it up again. A massive improvement to the local economy is badly needed,” he says.

Going forward, Wilson expects a subdued growth outlook for the housing market.

“It’s a market that’s running out of steam. There’s a lot of trepidation in this market,” he says.

Some bright spots

Although there have been on-again, off-again signs of an improvement in Hobart’s housing market, the constant positive has been the strong rental returns being achieved in the city.

House rents rose by 1.2% over the past 12 months and unit rents are 4.2% higher, pushing local gross rental yields to become the second highest of any capital city. Rental yields sit at 5.3% for houses and 5.2% for units.

Despite the overall slowdown, there are areas that are defying the downturn, according to Linda Phillips, head of research at Propell.

“Suburbs within the municipality of Hobart have currently achieved new peak median house prices since 2010, with shorter selling periods and some properties transacting before they reach the marketplace. However, these current levels of demand are only being experienced within the inner-city metropolitan suburbs. The outer and regional suburbs are experiencing a totally different market dynamic, with minimal capital growth, increased price volatility and longer selling periods that can extend to greater than six or 12 months. Accurate pricing of properties for sale within these regional locations is crucial to achieve a sale,” she explains.

There are also some positive developments in the tourism sector, with some encouraging numbers, according to Phillips.

“Tasmania is seeing a resurgence in tourist numbers, partially led by the government’s marketing initiatives, including the recent refurbishment of the Spirit of Tasmania,” she says.

She notes that Qantas has recently announced an increase in scheduled flights to the state, and it’s expecting a record cruise ship season in the coming months. There are also a number of large accommodation projects commencing and mooted for the Hobart CBD.

“Tasmania no longer has the highest unemployment rate in the country, with the Tasmanian unemployment rate trending more closely to the national rate with a gap of only 0.6%,” says


Affordability is still a strong drawcard, in her view. “The Hobart median house price is approximately 45% below that of the nation’s, offering first home buyers an opportunity to enter the real estate market,” she says.


Weak on all fronts

Darwin is dealing with another blow as rents lose ground amid falling prices

Landlords in Darwin may still be racking up decent yields, but this may soon come to an end, based on the recent rental report by Domain. During the past 12 months, median rents for houses and units plunged dramatically, losing 10.6% and 12.7% respectively.

“They are now at the lowest levels the city has seen since June 2012,” says Andrew Wilson, senior economist at Domain. “Just like Perth, the rental market is suffering due to falling interstate migration. As we’ve seen in Perth, there has been a significant decrease in the cost of both house and unit rents. The weakening activity from fly-in, fly-out workers, which previously created high demand, has resulted in higher vacancy rates with no end in sight.”

The decline in rents comes as prices continue to lose ground. During September, prices fell by 0.9%, according to CoreLogic RP Data. Over the year, median prices fell by 3.9%, the biggest drop across all other capital cities.

According to Cameron Kusher, senior research analyst at CoreLogic RP Data, house values fell 3.1% over the past year. Unit values suffered an even bigger loss, with a 7.4% drop over the same period. During the three months ending September, values plunged by a massive 13.3%.

“Darwin’s housing market is well into a correction,” he says. “Weekly rents are also moving lower. Despite the sharp fall in weekly rents, Darwin’s gross rental yields are still the highest of any capital city for detached houses, at 5.5%, and equal highest with Hobart for units, at 5.5%.”

Like Perth, Darwin has been affected by the downturn in resource sector employment, according to Linda Phillips, head of research at Propell.

“Darwin is a small, specialised market and subject to greater volatility in prices,” she says. “The Inpex project is halfway through its five-year construction phase and currently is one of the major employers, with 8,000 workers. When these employees were recruited, the influx of workers into the market created a massive increase in home prices. But with the addition of new housing developments and the release of new land, supply is catching up with demand and prices are easing.”

Phillips notes that the outlook for LNG exports is still volatile and will continue to weigh on the market. “It is very much tied to the outlook for the Chinese economy, which is subject to considerable uncertainties at present. In the medium term, there is a gap between supply and demand in the housing market and it is likely to take several years before the market finds a new equilibrium level.”

Despite this gloomy outlook, Wilson is more upbeat about Darwin’s prospects compared to Perth.

“Darwin’s prospects are more positive,” he says. “I think it has better upside potential compared to Perth. The economy is still performing well. There are also other economic drivers such as agriculture and tourism, in addition to the Inpex LNG project.”


House values steady but units suffer

The positive energy in the Canberra market appears to be confined to just the housing market as unit values slide dramatically

Canberra was the third best performing market during September, racking up 1% in median dwelling price growth, according to CoreLogic RP Data.

Since the beginning of the year, median values have grown by 4.2%, coming just behind Sydney and

Melbourne. However, this growth is only limited to houses, with units still suffering from oversupply. In September, median unit values dived 4.6%. Over the past 12 months, values dropped by 6.2%.

The rental market for units has also weakened, with Domain reporting a drop of 1.3% in the median rent during the September quarter.

Linda Phillips, head of research at Propell National Valuers, explains that Canberra has always performed differently to other markets, since it is tied to employment opportunities in the public sector.

“With the change in leadership in the federal government, there has been a new mood of optimism in the public sector,” she says. “The Public Service Commission has passed responsibility for the hiring of government staff back to individual departments and agencies, and the spectre of past cuts is now fading from memory.”

Phillips expects this will be reflected in the housing market during the next year. “Propell is projecting price growth of 3% in the next year, modest by comparison to Sydney and Melbourne, but nevertheless a positive move,” she says.

“The median house price in Canberra is the fourth highest in the country, which probably means that we won’t see double-digit price rises. But when Sydney and Melbourne are projected to show 5% price increases over the next year, a 3% result for Canberra would be a respectable one.”

Although the overall growth in house prices has been modest, there are considerable differences in demand between regions, according to Phillips.

“The regions with the highest levels of activity have been Gungahlin-Hall. Within that, the suburb of Casey recorded growth in house prices of 31.4% in the past year, on 166 sales. Crace recorded price increases of 17.8% on 81 sales.

“Lyneham is one of the more expensive suburbs, with a median price of $700,000, and it has been highly sought after by both buyers and renters. The suburb has a wide range of properties available, from new townhouse developments to old heritage homes. It is an attractive suburb, with tree-lined streets, and it is close to the city,” says Phillips.



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